Why India Could Be the World's Most

Important Solar Market

By Travis Hoium | More Articles
February 22, 2015 | Comments (1)

Large solar plants like this one are starting to pop up in India. Image source: SunEdison.

Europe, the U.S., Japan, and China have been the stars of the solar industry for the past decade. In
the early 2000s, Europe's feed-in tariffs gave birth to the industry as we know it. China brought lowcost manufacturing and billions of dollars in capacity expansions at a rapid rate. Now, the U.S. and
Japan are growing demand based on market forces, not subsidies or government mandates.
But the biggest prize in the solar industry could be India. The country has an underserved population
that solar energy could help to power, and its population of over 1 billion provides an opportunity for
growth that could last for decades.

Image source: First Solar.

India's big solar plans

India actually has two distinct potential solar markets, utility scale and small distributed solar on
rooftops in rural areas . First, the government is pushing massive 500-plus megawatt solar power

plants in a bid to build 100 gigawatts of solar by 2022. SunEdison(NYSE: SUNE ) has been an
early mover in this market, saying recently it will build over 15 GW of wind and solar in the next
seven years.First Solar (NASDAQ: FSLR ) is also moving into the market with a plan for 5 GW of
solar projects.
The U.S. has said it is ready to help cover the estimated $160 billion investment needed to build that
much solar energy, a potential financial lifeline for India's unstable energy industry.
To put this investment into perspective, China is the world's largest solar energy producer, with 33.4
GW installed, according to Bloomberg New Energy Finance, while India has just 3.3 GW of solar. To
hit 100 GW by 2022, India would have to install on average 13.8 GW of solar every year, more than
any country has ever installed and double what the U.S. installed in 2014.
The smaller, and potentially more important Indian solar market
Mega-solar projects aren't the only kind of solar energy India will build in the next few years.
Distributed solar, installed on rooftops or in fields close to demand sources, will play a large role in
powering the country's rural populations.
The central grid does a poor job of reaching some of India's most remote locations, and there's little
hope they'll be connected anytime soon. The best option is for communities to build their own
microgrids, powered by locally produced energy from wind, solar, and other sources and including
new technologies such as energy storage and demand response.
Why the industry will grow for decades
India has a couple things going for it that other countries investing in solar don't. The nation is
expected to be the world's most populous country by 2030. This rapid population growth will be one
of the drivers of India doubling the amount of energy it consumes by that time, according to the
International Renewable Energy Agency.

Image source: NREL.

As you can see above, India also has strong solar resources, particularly in the western part of the
country. In the map above, the region that gets 5.0 to 6.0 kW-hrs/m2/day gets a similar amount of
sunlight as the southwestern U.S. in terms of intensity. For some perspective, nearly all of the

country gets more solar energy than northeastern U.S. states such as New York, New Jersey, and
Massachusetts.
Germany, China, the U.S., and other nations have also done much of the dirty work in proving out
solar energy's feasibility and lowering costs to prices competitive with fossil fuels. India can now
install large-scale solar plants for $1.60 per watt or less, which is a fraction of what it cost Germany
to install most of its solar capacity.
These strong growth factors and a government that is putting its weight behind solar energy make
India one of the world's most important solar markets. Companies that can gain market share and
win projects there should reap billions of dollars in profits for investors. It's just a race to see who will
get there first.
Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position
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Where is the Indian solar market heading?

Ever since the new government came into power, particularly in the last two months, there have been
tremendous amount of preparatory work done to make solar a significant part of countrys energy
needs. Indian power minister has an ambitious vision of building 100 GW of solar power by 2020
and that vision is exactly the same as what China has for solar industry by 2020. In solar, may be, we
are 10 years behind China, but no country that has the same capacity, availability of labour and
qualified workforce and a huge domestic market. India can only be perhaps second to China. We
have to give him the credit for being so courageous and bold. So, not just talks, the new government
at the Centre is doing some real work. International Energy Agency has also said that by 2050 the
Number One source of electricity in the world will be solar.
How should India drive its solar transformation for both economic and social
benefits?
In my view, solar is going to become one of the lowest-cost forms of generating electricity, even
cheaper than fossil fuel. In India, if you analyse the bids for power plants with imported coal, they
are all in the range of Rs.5.50 to Rs.7/kWh. It is not cheaper than that. And, usually the thermal
plants powered by imported coal have all kinds of relief for increase in price of coal and forex.
Basically, there is some sort of indexation of international coal prices. So, the price can go up.
The most recent solar bids that have come in Karnataka are all in the range of Rs.6.50-7/kWh. So,
solar is already in the ballpark of coal prices. Also, coal is polluting, takes many years to develop.

Environment clearances are challenging. Fuel linkage is an issue, and domestic coal has been having
all sorts of problems over the last few months.
Imported coal has the price variability. But, solar is clean. It can be developed in few months, and
constructed in 6-12 months, no issue of fuel linkages, generates electricity during the day time, and
no seasonality. So, when we compare all sources of energy - nuclear, wind, gas and coal- solar clearly
is emerging as a darling.
Solar costs have also come down. Renewable sources have to play a big role in energy generation,
and in that renewable space, solar is clearly emerging as a winner. This may be the year in India for
the first time that solar may surpass wind in annual capacity addition.
What kind of an indigenisation plan is required to develop a strong domestic
manufacturing?
I think it is a golden opportunity for India to create an industry in early days of that industry. It is
really nice and welcoming to see the Prime Minister focusing on Make in India strategy. But
fundamental idea should be to focus on the industries that can win, export and be competitive
globally. If you look at the solar value chain, over 90 per cent of solar in the world is crystalline
silicon, and thousands of companies do crystalline silicon. So, it is very hard for thin-film segment to
compete with crystalline silicon as there is only handful of companies. You have the innovation
happening through a handful of companies versus thousands of companies where engineers are
going to work every day and are making progress. If India decides to scale in solar, it has to think
about supporting the crystalline value chain. If you look at this value chain, it is just the module and
cell that have been discussed for domestic content in India. But they are the much simpler parts of
the value chain. A very little value is added domestically. It is really a soldering operation and the
module making is very, very simple. India needs to think what can be the strategic focus area in the
value chain. Polysilicon is the crude oil refining equivalent, and that needs to be done domestically.
Once that is done, all the others will surround the ecosystem. Supply chain industry can easily come
because it requires only a little investment. Today, there is probably 250,000 metric tonnes of
polysilicon manufactured in the world. By 2020, it will double, but with new technology. Polysilicon
takes billions of dollars of investments. It wont happen unless the government works out a strategy
with various polysilicon manufacturers.
How has been Sun Edisons growth curve in India?
When we look back, we were a company that has received a lot of support from parent. Our global
CEO Ahmed Chatila has been passionate about India and generally emerging markets. He always felt
that solar will be big in developing countries because so much energy infrastructure is going to be
required, and sooner or later, the costs are going to be at parity. As far as we are concerned, across
several segments there is parity and solar can compete effectively today not in future. So, grid parity
is achieved. With that background and vision, he supported us a lot, and we have been able to
accomplish reasonably well in our first part of the journey in India. Now we have a new and vibrant
India. The promises are big and expectations are even higher because things seem to be looking up
significantly. We have begun our journey, but it is still a long way go to make any meaningful impact.
We are just starting to scratch the surface when it comes to making an impact in Indias energy mix.
We have signed a MoU with the Rajasthan government for developing 5000 MW over the next five

years. We have won 150 MW projects in Karnataka. We are also awaiting results in few other states.
When we do our job, we will bring capital also. Our goal is to be a participant in a meaningful way.
Solar mission is not only about large power plants, but also about smaller distributed
generation. What are the opportunities and challenges in this segment?
In distributed generation, there are five segments. First, commercial roof-top is the leading segment
and that is taking off as parity has been achieved in certain states like Tamil Nadu & Maharashtra.
Solar Energy Corporation of India is doing a great job of promoting this. Second is industrial
segment. It has large roof-tops that make sense. But industrial tariff is lower. So, it is more
challenging to make economics work now. Third is the residential segment that is very impressive. It
will grow like what happened in countries like Japan, the U.S., and Australia. But the challenge is the
residential electricity, which is subsidised a bit already and is lower when compared to commercial
and industrial. So, may be a couple of years from now, it can show good progress. In the mean time,
the leading adopters will do off-grid residentials in conjunction with battery or inverter. Fourth
segment is the irrigation pumping segment. In my view, it is one of the most fascinating and
important segment and government should support it as it will transform India. If the government
takes it seriously, it can convert the 30 million irrigation pumps into solar-powered ones. Thirty
million pumps of 5 kw or 5HP will be 150 GW of power generation from solar. It is possible and can
transform the lives of farmers.
Some state governments are supporting this. Fifth is the solar micro-grids. This will also have
transformation effect, and the government is focusing on it. So, when you think of distributed
generation, each of these five segments has to be dealt with separately with right policy and
framework.